What’s new: China plans to update investment regulations for its National Social Security Fund (NSSF), expanding the scope of what it can invest in domestically to include pension products and certain futures for hedging.
The existing rules governing the investment of the NSSF came into effect in 2001 and can no longer fully accommodate the development of the financial market or the fund’s investment management, the Ministry of Finance said in a notice accompanying the release of a draft of the updated regulations Wednesday.
Regulators have been expanding the scope of what the fund can invest in since 2002 through a series of special permissions. But as these permissions have accumulated over a long time, they need to be sorted out comprehensively, according to the finance ministry.
The draft regulations incorporate the special permissions, which allow investments in assets including bonds issued by local governments and policy banks.
Meanwhile, pension products, certain types of corporate bonds, and hedging tools such as stock index futures and options will be added to the list of approved assets and instruments.
The background: The NSSF was set up in 2000 to supplement the state pension system administered by provincial-level governments.
The fund’s annual rate of return on its investment tumbled to -5.07% in 2022 from 4.27% the previous year and 15.84% in 2020, according to data published by its operator, the National Council for Social Security Fund.
As of the end of 2022, the NSSF’s total assets under management amounted to nearly 2.9 trillion yuan ($416.4 billion), 90% of which were invested in the onshore market.
Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
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